What makes the exchange rate predictable and stable?
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Monetarists believe there's a direct link between the money supply and prices, real GDP, and employment. If the money supply is allowed to grow at a predictable rate, the economy will stay in balance. In effect, they feel that in the long-run, the economy will be stable at full employment if the velocity of money is predictable.
The Monetarists could have ended the Great Depression and brought the economy back to full employment. The Depression never would have happened if the Monetarists had been in charge.
Would a Monetarist be more likely to favour fiscal, monetary, or neither policy? Why?
Why is a high-quality bond typically considered a lower-risk investment than a stock?
A) Stocks are stable and do not change often.
B) A bond typically pays a fixed, predictable amount of interest each year.
C) Bonds are issued by many different entities.
D) Well-established company stocks pay dividends to their investors.
Because monetarists believe that output is sensitive to changes in the money supply, they recommend that the money supply be allowed to grow at a steady and predictable rate.
True
False